Destabilizing balanced-budget consumption taxes in multi-sector economies
AbstractWe examine the impact of balanced-budget consumption taxes on the existence of expectations-driven business cycles in two-sector economies with infinitely-lived households. We prove that, whatever the relative capital intensity difference across sectors, aggregate instability can occur if the consumption tax rate is not too low. Moreover, we show through a numerical exercise based on empirically plausible tax rates that endogenous business-cycle fluctuations may be a source of instability for all OECD countries, including the US.
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Bibliographic InfoArticle provided by The International Society for Economic Theory in its journal International Journal of Economic Theory.
Volume (Year): 9 (2013)
Issue (Month): 1 (03)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1742-7355
Other versions of this item:
- Kazuo Nishimura & Carine Nourry & Thomas Seegmuller & Alain Venditti, 2012. "Destabilizing Balanced-Budget Consumption Taxes in Multi-Sector Economies," Working Papers halshs-00796685, HAL.
- Kazuo Nishimura & Carine Nourry & Thomas Seegmuller & Alain Venditti, 2013. "Destabilizing Balanced-Budget Consumption Taxes in Multi-Sector Economies," AMSE Working Papers 1312, Aix-Marseille School of Economics, Marseille, France, revised Sep 2012.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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